The complexity of an IRS action can be daunting, but understanding the appeals process can make a big difference. Whether it’s a tax assessment or a collection action, it's critical to know your rights and what steps are involved in appealing an IRS decision. This guide provides a detailed overview of the appeals process, including required procedures, statistical findings, and real-world examples.
Understanding the appeals process
When the IRS takes action, such as issuing a tax assessment or initiating collection proceedings, you have the right to appeal if you disagree with the decision. After you have determined that you meet the criteria for an appeal, you can request an appeal by submitting a written protest. Complete your protest and mail it to the IRS address on the letter notifying you of your appeal rights. Do not send your appeal directly to the IRS Independent Appeals Office, as this will only delay the process and may prevent the Appeals Office from reviewing your case.
Step-by-step complaint procedure
Initial Review: Before your case goes to the Appeals Office, the IRS examination or collection office that issued a tax assessment or initiated a collection action will review your appeal and attempt to resolve the disputed tax issues. If that office cannot resolve your issues, it will forward your case to the appeals office for review.
Representation: If you appeal to the appeal body, you can represent yourself or be represented by a professional. Your representative must be:
- A lawyer
- A licensed certified public accountant or
- A licensed representative who is authorized to appear before the IRS
File a Protest: A formal written protest is required to request an Appeals Conference unless you meet the requirements for requesting a small case requests. The protest must be filed within the time period specified in the letter granting you the right to appeal the proposed changes, generally 30 days from the date of the letter.
Small case requests
If the entire amount of additional tax and penalty proposed for each tax period is $25,000 or less, you may submit a Small Case Request. Employee plans, exempt organizations, S corporations, and partnerships are not eligible for Small Case Requests. Follow the instructions in the letter received and use Form 12203, Request for Appeals Review, or prepare a brief written statement listing the disagreed items and reasons for disagreement.
Appealing a collection decision
For appealing a collection decision, select the appeal procedure corresponding to your case type for specific instructions. Remember to mail your appeal to the collection office that sent you the collection action letter with your right to a hearing.
Case Study: Successful Appeal
Consider the case of John Doe, a small business owner who received a tax assessment notice for $30,000 due to Inconsistencies in his reported income. John believed the assessment was incorrect and decided to appeal. By filing a written protest and following the proper procedures, his case was reviewed by the IRS Examination office but wasn’t resolved. The case was then forwarded to Appeals, where he was represented by a certified public accountant. After presenting additional documentation and evidence, John’s tax liability was reduced to $5,000, saving him $25,000.
Statistical Insights
According to the IRS Data Book, in Fiscal Year 2020, the IRS received over 77,000 appeals cases, with a significant portion related to collection due process and examination issues. Of these cases, approximately 40% were resolved without further litigation, highlighting the importance of the appeals process in providing taxpayers an opportunity to contest IRS decisions.
Conclusion
Appealing an IRS action can be a complex but worthwhile effort if you believe an error has been made. By understanding the process, following the correct procedures, and potentially seeking professional representation, you can effectively challenge and potentially overturn an unfavorable IRS decision. Always remember to follow to the specified timelines and provide thorough documentation to support your appeal. The appeals process is a valuable right that ensures taxpayers have a fair chance to dispute IRS actions and seek a resolution.